Opinion
Editorial

Canada Post: Transform or Privatize?

This national postal dispute reminds me of a slow-motion train wreck. The union is determined to perpetuate the past. Management is trying to keep Canada Post's (CPC's) financial future viable by pressing for concessions.

Meanwhile, they are losing customers who will never come back.

Regardless of how this ends it will not resolve the Harper Government's basic dilemma with this troubled Crown corporation. Should it continue to try to transform CPC, or is it time to privatize postal services?

The postal union's attitude of entitlement stems from being sheltered in a state-owned monopoly for generations. They had the ability -- until recently -- to bring the economy to a standstill in order achieve their demands.

Despite compensation that's 15% to 20% higher than their private- sector counterparts, postal workers have high absenteeism rates, and their productivity is persistently low.

Meanwhile, management is required by its sole shareholder, the Government of Canada, to maintain profits and service. This has to be accomplished while meeting CPC's Universal Service Obligation (USO). While delivering less letter mail to more than 200,000 new households ever year, the corporation is expected to remain profitable.

CPC has earned less that a 2% average, annual net income over the last 15 years -- not enough to finance capital improvements or its $3-billion under-funded pension plan.

Reconciling labour and management differences is made more difficult by growing competitive pressures. The range of new, more convenient and cheaper ways for business, government and the rest of us to advertise and move money, messages and goods is exploding.

Innovation is the enemy of monopoly. Canada Post is a prime example. Instead of facing up to this reality, past Conservative governments have ignored the privatization option in favour of trying to "transform" Canada Post. Their plan is fraught with problems, and puts billions of dollars at risk.

They have allowed Canada Post to borrow up to $2 billion -- loans guaranteed by the taxpayer -- to replace aging processing equipment. Unfortunately, most of the new equipment is designed to process outdated hardcopy direct marketing and transaction mail.

CPC is pursuing an expensive and untested E-Post service designed to deliver mail to homes using its own Internet system. Critics question whether it will be more convenient, cheaper or safer than the other choices that the digital revolution will bring us in the future.

The government is allowing CPC to increase rates by 5% a year until 2014 -- twice the current rate of inflation. These higher rates are supposed to bolster revenue. They are more likely to reduce revenue as customers flee to lower-cost alternatives.

The government has also promised to allow the corporation to enter other businesses. No specifics yet. It is difficult to understand why the government thinks Canada Post should, or even could, compete with banks and other businesses.

Harper's transformation plan is flawed. The case for privatizing CPC is more convincing.

First, there is no longer a public policy reason for the government to own Canada Post. Crown corporations such as Air Canada, CN Rail and Petro Canada were all privatized once their "public interest" role was fulfilled.

Canada Post was established to ensure that a letter mail service at uniform rates was available in every region of the country. Many countries including Germany, the Netherlands and Austria have fully or partially privatized their postal systems. The delivery of their letter mail has been opened up to private competition, often at lower rates.

Second, Canada Post is one of the most physical federal presences in the country, with a Canadian flag on every building. This visibility would be difficult to relinquish. But maintaining CPC for its local federal presence is questionable and costly.

Third, Canada can learn from the successful postal privatizations of other developed countries. The corporation's last CEO, Moya Green, tried to steer the Conservatives down that path, but without success. She was subsequently hired by the U.K. government to privatize the Royal Mail.

Fourth, we now have a majority government with the necessary clout to deal with the inevitable political and union opposition to any change in the ownership of CPC.

Finally, Canada Post, freed from the USO, and with lower two-tier labour costs, would become more attractive to private investors. Include its subsidiary Purolator, worth over a billion dollars, and buyers would soon emerge.

Instead of risking billions on trying to transform a Crown corporation that has outlived its usefulness, the Conservatives should privatize CPC. The sale proceeds could be used to finance a national program that brings high-speed Internet to every household in Canada.

That's a universal service that would be a national, social and economic game-changer.

R. Michael Warren is the CEO of the Warren Group and a public policy commentator. He is a former CEO of Canada Post, Ontario deputy minister and TTC chief general manager.